State of Minnesota s13

1 STATE OF MINNESOTA 2 IN SUPREME COURT 3 C8-84-1650 4 5 6 7ORDER PROMULGATING AMENDMENTS 8TO THE RULES OF PROFESSIONAL CONDUCT 9 10 11 On August 4, 2006, the Minnesota State Bar Association filed a petition

12recommending certain amendments to the Rules of Professional Conduct. This court

13held a hearing on the recommendations on December 13, 2006, reviewed the materials,

14and is fully advised in the premises.

15 IT IS HEREBY ORDERED that the attached amendments to the Rules of

16Professional Conduct be, and the same are, prescribed and promulgated to be effective

17July 1, 2007.

18 Dated: December 21, 2006

19 20 BY THE COURT: 21 22 23 24 _____/s/______25 Russell A. Anderson 26 Chief Justice 27 Amendments to Minnesota Rules of Professional Conduct 28 Rule 1.15 29 30 (Text to be added indicated by underlining; 31 text to be deleted indicated by strike-out.) 32 33 34RULE 1.15: SAFEKEEPING PROPERTY

35 (a) All funds of clients or third persons held by a lawyer or law firm in connection with a

36representation shall be deposited in one or more identifiable interest bearing trust accounts as set

37forth in paragraphs (d) through (g) and as defined in paragraph (o). No funds belonging to the

38lawyer or law firm shall be deposited therein except as follows:

39 (1) funds of the lawyer or law firm reasonably sufficient to pay service charges

40 may be deposited therein;

41 (2) funds belonging in part to a client or third person and in part presently or potentially

42 to the lawyer or law firm must be deposited therein.

44 * * * *

46 (d) Each trust account referred to in paragraph (a) shall be an interest bearing account in a

47bank, savings bank, trust company, savings and loan association, savings association, or

48federally regulated investment company an eligible financial institution selected by a lawyer in

49the exercise of ordinary prudence.

50 (e) A lawyer who receives client or third person funds shall maintain a pooled interest

51bearing trust account (“IOLTA account”) for deposit of funds that are nominal in amount or

52expected to be held for a short period of time. The interest accruing on this account, net of any

1 1 53transaction costs, shall be paid to the Lawyer Trust Account Board established by the Minnesota

54Supreme Court.

55 (f) All client or third person funds shall be deposited in the account specified in

56paragraph (e) unless they are deposited in a:

57 (1) separate interest bearing trust account for the particular third person, client, or

58 client’s matter on which the interest earnings, net of any transaction costs, will be paid to

59 the client or third person; or

60 (2) pooled interest bearing trust account with subaccounting which will provide

61 for computation of interest earned by earnings accrued on each client’s or third person’s

62 funds and the payment thereof, net of any transaction costs, to the client.

63 (g) In determining whether to use the account specified in paragraph (e) or an account

64specified in paragraph (f), a lawyer shall take into consideration the following factors:

65 (1) the amount of interest earnings which the funds would earn accrue during the

66 period they are expected to be deposited;

67 (2) the cost of establishing and administering the account, including the cost of

68 the lawyer’s services;

69 (3) the capability of financial institutions described in paragraph (d) to calculate

70 and pay interest earnings to individual clients.

71 Only funds that could not accrue earnings for the client, net of the costs described in

72subparagraph (2) above, may be placed or retained in the account specified in paragraph (e).

74 * * * *

2 2 76 (j) Lawyer trust accounts, including IOLTA accounts, shall be maintained only in eligible

77financial institutions approved by the Office of Lawyers Professional Responsibility. Every

78check, draft, electronic transfer, or other withdrawal instrument or authorization shall be

79personally signed or, in the case of electronic, telephone, or wire transfer, directed by one or

80more lawyers authorized by the law firm.

81 (k) A financial institution, shall to be approved as a depository for lawyer trust accounts,

82if it must files with the Office of Lawyers Professional Responsibility an agreement, in a form

83provided by the Office, to report to the Office in the event any properly payable instrument is

84presented against a lawyer trust account containing insufficient funds, irrespective of whether the

85instrument is honored. The Lawyers Professional Responsibility Board shall establish rules

86governing approval and termination of approved status for financial institutions, and shall

87annually publish a list of approved financial institutions. No trust account shall be maintained in

88any financial institution that does not agree to make such reports. Any such agreement shall

89apply to all branches of the financial institution and shall not be canceled except upon three days

90notice in writing to the Office.

92 * * * *

94 (o) Definitions.

95 “ Trust account” is an account denominated as such in which a lawyer or law firm holds

96funds on behalf of a client or third person(s) and is: 1) an interest-bearing checking account; 2) a

97money market account with or tied to check-writing; 3) a sweep account which is a money

98market fund or daily overnight financial institution repurchase agreement invested solely in or

3 3 99fully collateralized by U.S. Government Securities; or 4) an open-end money market fund solely

100invested in or fully collateralized by U.S. Government Securities. An open-end money market

101fund must hold itself out as a money market fund as defined by applicable federal statutes and

102regulations under the Investment Act of 1940, and, at the time of the investment, have total

103assets of at least $250,000,000. “U.S. Government Securities” refers to U.S. Treasury

104obligations and obligations issued or guaranteed as to principal and interest by the United States

105or any agency or instrumentality thereof. A daily overnight financial institution repurchase

106agreement may be established only with an institution that is deemed to be “well capitalized” or

107“adequately capitalized” as defined by applicable federal statutes and regulations.

108 “ IOLTA account” is a pooled trust account in an eligible financial institution that has

109agreed to:

110 (1) remit the earnings accruing on this account, net of any allowable reasonable fees,

111 monthly to the Lawyer Trust Account Board (LTAB) established by the Minnesota

112 Supreme Court;

113 (2) transmit with each remittance a report on a form approved by the LTAB that shall

114 identify each lawyer or law firm for whom the remittance is sent, the amount of

115 remittance attributable to each IOLTA account, the rate and type of earnings applied, the

116 amount of earnings accrued, the amount and type of fees deducted, if any, and the

117 average account balance for the period in which the report is made; and

118 (3) transmit to the depositing lawyer or law firm a report in accordance with normal

119 procedures for reporting to its depositors.

120 An approved eligible financial institution must pay no less on IOLTA accounts than (i)

121the highest earnings rate generally available from the institution to its non-IOLTA customers on

4 4 122each IOLTA account that meets the same minimum balance or other eligibility qualifications, or,

123(ii) 80% of the Federal Funds Target Rate on all its IOLTA accounts. The rate to be paid shall

124 be fixed on the first day of each month, subject to rate changes during the month reflected in

125 normal month-end calculations. Accrued earnings and fees shall be calculated in accordance with

126the eligible financial institution’s standard practice, but institutions may elect to pay a higher

127earnings rate and may elect to waive any fees on IOLTA accounts. A financial institution may

128choose to pay the higher sweep or money market account rates on a qualifying IOLTA checking

129account.

130 “ Allowable reasonable fees” for IOLTA accounts are per check charges, per deposit

131charges, sweep fees and similar charges assessed against comparable accounts by the eligible

132financial institution. All other fees are the responsibility of, and may be charged to, the lawyer

133maintaining the IOLTA account. Fees or charges in excess of the earnings accrued on the

134account for any month or quarter shall not be taken from earnings accrued on other IOLTA

135accounts or from the principal of the account. Eligible financial institutions may elect to waive

136any or all fees on IOLTA accounts.

137 “Financial Institution” includes banks, savings and loan associations, savings banks, and

138any other businesses or persons that accept for deposit funds held in trust by lawyers.

139 “ Eligible financial institution” for trust accounts is a bank or savings and loan

140association authorized by federal or state law to do business in Minnesota, the deposits of which

141are insured by an agency of the federal government, or is an open-end investment company

142registered with the Securities and Exchange Commission authorized by federal or state law to do

143business in Minnesota.

5 5 144 “Properly payable” refers to an instrument which, if presented in the normal course of

145business, is in a form requiring payment under the laws of this jurisdiction.

146 “Notice of dishonor” refers to the notice which an eligible financial institution is required

147to give, under the laws of this jurisdiction, upon presentation of an instrument that the institution

148dishonor.

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